Four Analysts Weigh in on Apple’s December Quarter

Source: Apple.com

Analysts are refining their earnings forecasts for Apple (NASDAQ:AAPL) ahead of the company’s fiscal first-quarter earnings announcement. due out Monday. Although a number of analysts have predicted that there will be upside in Apple’s earnings report, they disagree on whether the upside will be a result of the iPad or the iPhone. Here are the earnings forecasts from four prominent analysts, per Barron’s.

Morgan Stanley analyst Katy Huberty says that Apple will announce 54 million to 55 million iPhone unit sales and as many as 26 million iPad unit shipments that could fuel revenue upside, reports Barron’s. Assuming a gross margin of 37.3 percent, Huberty anticipates $57.2 billion revenue and earnings per share of $14.01 for the December quarter versus consensus of $57.42 billion revenue and EPS of $14.09. The Morgan Stanley analyst reiterated an Overweight rating and a $630 price target on Apple shares.

Huberty also shared her thoughts on Apple’s overall prospects in 2014. This year will be “the beginning of a new cycle of growth and innovation monetization,” wrote Huberty, according to Barron’s. She noted that many investors are excited about the long rumored large-screen iPhone that several analysts have predicted will be released this year. She also suggested that a new mobile payment service could soon be unveiled by Apple, possibly at the upcoming Worldwide Developers Conference.

Based on Apple’s history of outperforming the supply chain in the March quarter, Huberty predicted iPhone unit sales of 45 million and revenue of $45.8 billion for Apple’s second fiscal quarter. She also noted that iPad sales may slip to 22 million units in the second quarter. Based on a gross margin of around 36.9 percent, Huberty anticipates EPS of $11.67 in Apple’s March quarter, reports Barron’s.

Mizuho U.S. Equity Research analyst Abhey Lamba took a more bullish perspective than Huberty and predicted revenue “in the $58 billion to $60 billion rang,” based on sales of 55.86 million iPhone units and 25.3 million iPad units. According to a research note obtained by Barron’s, Lamba predicted EPS of $14.50 to $14.75 for Apple’s December quarter.

However, Lamba sees a greater “seasonal downtick” in the March quarter than anticipated by Huberty. “We expect management to forecast $42-44 billion in revenues for F2Q14 versus consensus of $45.8 billion and gross margin to be about 37 percent, which would be in-line with consensus. As such, EPS also has a downside risk,” wrote Lamba, via Barron’s.

Susquehanna Financial Group analyst Christopher Caso also saw upside from the iPhone in the December quarter and predicted sales of 53 million iPhone units, Barron’s says. According to the publication, Caso pointed out that the “favorable production shift in favor of iPhone 5s” will boost Apple’s gross margins for fiscal first quarter.

Based on his iPhone production checks, Caso predicted $57.07 billion revenue and EPS of $14.02 for the December quarter. On the other hand, he noted: “[W]e continue to believe Street iPad estimates are slightly too high. Our 4Q iPad production forecast indicates 22-24 mln units in C4Q, with sell-through expectations of 24 mln.”

Finally, Avondale Partners analyst John Bright predicted $57.4 billion in revenue and EPS of $14.52 for Apple’s fiscal first quarter, per Barron’s. Bright boosted his price target on Apple shares from $600 to $700 and reiterated a “Market Outperform” rating.

Bright also took a look at Apple’s March quarter and the potential impact of the company’s recently announced distribution deal with China Mobile (NYSE:CHL). “Assuming a tax rate of ~26 percent, we performed a sensitivity analysis on the adoption of AAPL products by China Mobile subscribers vs. gross margins, and we estimate an incremental C14 EPS impact of ~$5-20,” wrote Bright, via Barron’s. The analyst predicted $45.99 billion revenue and EPS of $11.41 for Apple’s second fiscal quarter.

Like Huberty, Bright also offered his thoughts on Apple’s product plans. The Avondale Partners analyst believes Apple needs to release an iTV product that will revolutionize the television industry in the same way that the iPod reshaped the music industry.

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